The $1 billion acquisition of rent-to-own startup Divvy Homes by Brookfield Properties, announced on Wednesday, has left some shareholders without a payout, according to sources familiar with the deal. This outcome is a reflection of the turbulent journey the proptech industry has endured over the past decade.

Founded in 2016, Divvy Homes had raised over $700 million in debt and equity from prominent investors such as Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z). By 2021, the company was valued at $2.3 billion. Although the acquisition price is half of its peak valuation, the deal can still be considered a win in an industry that has seen a string of shutdowns and bankruptcies.

However, not all shareholders will benefit from the sale. According to a letter from Divvy CEO and co-founder Adena Hefets, viewed by TechCrunch, common shareholders and holders of the Series FF preferred stock will not receive any consideration. The letter explained that after repaying outstanding indebtedness, transaction costs, and liquidation preference to preferred shareholders, there will be no remaining funds for these stakeholders.

The Series FF preferred stock, also known as Founders Preferred Stock, is a type of stock issued to founders at the time of incorporation to facilitate future equity financings. This means that founders, employees, and venture capital firms will not receive any payout from the sale, according to a source who spoke to TechCrunch on condition of anonymity.

Divvy Homes operated a rent-to-own model, working with renters who wanted to become homeowners by buying the home they wanted and renting it back to them for three years while they built the savings needed to own it themselves. However, the company faced challenges when mortgage interest rates surged in 2022, leading to three rounds of layoffs in a year's time. The company's last known funding occurred in August 2021, a $200 million Series D funding led by Tiger Global Management and Caffeinated Capital.

In her letter, Hefets shared that the decision to sell wasn't easy and came after a thorough review of Divvy's strategic alternatives and significant deliberation around their options. She attributed the move to years of fighting difficult market conditions, including rising interest rates, and making cost cuts as possible. As the company looked ahead to 2025, it decided the best way forward was to sell its portfolio of homes and return as much capital as possible to shareholders.

Hefets expressed her disappointment with the financial outcome, but pride in the impact Divvy had on its customers' lives. The acquisition marks the end of an era for Divvy Homes, but its legacy will likely influence the proptech industry's future trajectory.

The deal serves as a reminder of the industry's volatility and the importance of adaptability in the face of changing market conditions. As the proptech landscape continues to evolve, companies will need to be agile and responsive to shifting consumer needs and preferences.

The acquisition of Divvy Homes by Brookfield Properties is a significant development in the proptech industry, with implications for stakeholders and the broader market. As the industry navigates this new landscape, it will be essential to monitor its progress and evolution.